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Taking on Patent Trolls Must be Part of any Congressional Patent Reform

Michi Iljazi

July 13, 2015

While America has always stood as a shining symbol of innovation, today’s inventors and job creators face a growing, unbridled threat from predatory entities known as “patent trolls.” Originally enshrined in the United States Constitution to safeguard ingenuity and original creations, the patent system has instead been turned on its head and manipulated into a tool used to harm those it was created to protect.

The Founding Fathers knew that strong intellectual property protections were crucial to human progress, and like many of our other liberties, they had the foresight to ensure that they were safeguarded. They wrote Article 1, Section 8 of the U.S. Constitution to empower Congress to specifically “promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

What the Founders did not envision, however, was non-authors and non-inventors gaining rights to these same patents and subverting their intent.

Patent trolls are often comprised of one or two individuals hiding behind a fictitious shell corporation. They scour the Internet trying to find vague, near-end patents, buying them up with the goal of filing lawsuits to extort settlements from businesses or individuals who can’t afford the high cost of litigation. They issue threatening letters, demanding payment through licensing fees for the use of ambiguous or commonly-utilized technologies, or threaten to sue. Most small businesses can’t afford the steep costs of litigation and instead are bullied into paying excessive licensing fees.

Patent lawsuits, while cheap for trolls to file, are expensive to defend against. And 50 percent of those targeted by these predatory practices are small businesses.

Patent trolls’ actions affect companies whose goods and services we use every day, like grocery stores, car dealerships and local hotels. Companies have been targeted for using such common technologies as internal office scan-to-email capabilities or providing Wi-Fi to customers. In fact, a patent troll made millions suing online retailers over their use of an online shopping cart on their website.

Patent trolls do not create products or original ideas. They do not stimulate jobs, help grow our economy or churn a profit for anyone other than insiders. They simply exploit our convoluted litigation system, partnering with voracious trial lawyers to extract settlements from small businesses.

On average, businesses pay $1.3 million to settle these cases out of court or an average of $1.75 million if they decide to go to trial. Unfortunately, the deck is stacked against them. Patent trolls tend to win three times as much per lawsuit than legitimate businesses. And under the current system, there is no way for winning companies to recoup their legal fees.

With barriers to business already high, this is the last thing job creators need, greatly hindering growth and innovation. Unfortunately, the number of patent trolls is only growing; United Patents reports a 36 percent increase in district court patent cases from January 2014 to January 2015.

Of course there needs to be intellectual property protections to guard against legitimate infringements. However, it’s time to level the playing field and provide transparency to the patent litigation process.

Bills have been introduced in Congress to reform our broken system. Both the Innovation Act (U.S. House) and the PATENT Act (U.S. Senate) would limit excessive discovery requests, provide clarity as to who is filing suit, require patent trolls to provide detailed information to support their allegations and allow judges greater discretion in shifting fees.

Most importantly, both bills would strengthen the ability of winning defendants in truly frivolous cases to recover their legal costs from the abusive patent troll, including a strong fee recovery mechanism so that trolls can’t cut and run or declare bankruptcy, leaving the winning party without a way to collect.

Costing the economy billions each year, patent trolls remain a major threat to America’s economy, employers and our innovative spirit. The time is now for meaningful patent reform. After numerous failed attempts in the past few years, the time has come for Congress to finally get it right and act.